UPDATE 1-India's NSE index marks highest close in nearly three weeks

* Investors seen building positions ahead of budget-analyst (Adds milestones)

By Indulal PM

MUMBAI, July 1 (Reuters) - India’s NSE index rose on Tuesday to mark its highest close in nearly three weeks, approaching a record high hit last month, as auto makers such as Maruti Suzuki India surged after stronger monthly sales, while overseas buying also helped.

Foreign institutional investors bought shares worth $214.42 million on Monday, their biggest single-day purchase since June 12, according to provisional exchange data. Overseas funds have pumped in $9.9 billion so far this year, spurring a rally that took the NSE index to a record high last month.

A firm trend from regional markets on upbeat manufacturing data from China also helped. In India, the HSBC Manufacturing Purchasing Managers’ Index, compiled by Markit, advanced to 51.5 in June from 51.4 in May, expanding at the fastest pace in four months.

Investors were also seen churning portfolio and buying into stocks such as infrastructure and capital goods, where the newly elected government is likely to give more emphasis in its maiden budget on July 10, traders said.

“Market is aligning itself for the budget, which will be the next big event. We can see sector rotation. Budget is going to be focused on infrastructure, strengthening of banks and bringing out reforms in agriculture for larger growth. And those stocks related to these sectors will be in the limelight for the short-term,” said Deven Choksey, managing director, KR Choksey Securities.

The broader NSE index ended 0.31 percent higher at 7,634.70 points, within touch of a peak of 7,700.05 hit on June 11, marking its highest close since June 12.

The benchmark BSE index gained 0.4 percent to 25,516.35 points, not far from the record high of 25,735.87 hit on June 11, marking its highest closing since June 17.

Shares in Maruti gained 5.9 percent to a record high with the biggest single-day gain since March 18 after it reported a 33.5 percent in monthly vehicle sales, which beat some analysts’ expectations.

FACTORS TO WATCH * Euro back around $1.37 as ECB meets again * Brent holds above $112 as China data draws focus back to demand * European stocks get second half off to steady start * Foreign institutional investor flows * For closing rates of Indian ADRs